Rent’s have gone up because prices have gone up, but they’re still not as out of whack as prices. I think we’re reaching the point (due to layoffs, living expenses, over-crowding, and demographic conditions) where we will see population declines, rent declines, and further price drops.
The psychological benefits of a home I would argue are most often imagined by those who have never owned. I used to think I was saavy because I didn’t want to throw money out the window by renting. I couldn’t be happier renting.
Foreclosures typically go for market value, not necessarily 50% below the FSBO down the street. Think of them as incremental corrections to inflated prices. And with an unprecedented number of them, and more on the way, prices will fall for a long time.